tax benefits of a conservation easement
TRANSCRIPT
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8/3/2019 Tax Benefits of a Conservation Easement
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TAX BENEFITS OF
conservation easements
SANTA FE CONSERVATION TRUST 505.989.7019 [email protected]
SFCT.ORG P.O. BOX 23985, SANTA FE, NM 87502
Printed on 100% recycled post-consumer paper
WHAT IS A CONSERVATION EASEMENT?
In use for over 100 years, conservation easementssometimes called private land protection agreementsarelegal agreements private landowners can use to protect their open, natural lands in perpetuity. Legally binding,conservation easements permanently retire certain development rights of a property, as agreed upon by the propertyowner and a land trust. Each conservation easement is unique in that it restricts and protects specic values that theowner wishes to conserve on their particular piece of property. Tese conservation values may be agricultural, scenic,historic, ecological, or recreational. Te land trust holds the easement in perpetuity, taking on the responsibilityof ensuring that the terms of the easement are met, regardless of who owns the property in future. Conservationeasements ride with the property, not the landowner. A landowner who places a conservation easement on theirproperty still retains ownership and may sell, mortgage, or bequeath their land as usual. However, because itretires certain development rights, a conservation easement often signicantly reduces a lands potential monetary
value. Tis gure, as determined by a special appraisal, is considered a charitable gift by both the federal and stategovernment, qualifying the landowner for a federal tax deduction, andsince 2008a transferable (saleable) statetax credit.
WHAT IS THE FEDERAL TAX DEDUCTION?
Te value of an easement may be deducted from Federal income taxes as a charitable gift. For donations made in2008 and 2009, an easement donor may deduct the full value of the easement up to 50% of adjusted gross income(qualied farmers may be able to deduct up to 100% of AGI). Donors may carry this deduction forward up to 15years until the value of the charitable gift is spent in tax savings. (Note: we anticipate Congress will re-authorize
these same levels for 2010check with your tax advisor for the most up to date information).
WHAT IS THE NEW MEXICO LAND CONSERVATION TAX CREDIT?
Te New Mexico Land Conservation ax Credit is a state tax credit designed to encourage the conservation of NewMexicos private open lands. Landowners who donate land or conservation easements on or after January 2008 mayreceive a tax credit of 50% of the easements value, up to $250,000, that can be used as a dollar-for dollar write-oof state income taxes. Te tax credit is also transferable, allowing sale of the tax credit to a third party for cashanattractive option for landowners whose state tax bills are relatively low.
HOW CAN I EARN AND USE A TAX CREDIT?
o earn a tax credit, a landowner must donate a conservation easement to a qualied land trust or governmententity. Prior to the donation, the states Energy, Minerals, and Natural Resources Department reviews the easementagreement to ensure that it meets state standards. After donating the easement, the owner submits an application tothe state, which then issues the credit. Once earned, a landowner may either: Use their credit to reduce state income tax liability (and carry forward unused credits for up to 20 years), or Receive immediate cash compensation for the credit by transferring all or a portion of it to a third party.
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8/3/2019 Tax Benefits of a Conservation Easement
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TAX BENEFITS OF
conservation easements
SANTA FE CONSERVATION TRUST 505.989.7019 [email protected]
SFCT.ORG P.O. BOX 23985, SANTA FE, NM 87502
Printed on 100% recycled post-consumer paper
CALCULATING A CREDIT:
As an example, if a landowner donates a conservation easement valued at $600,000 to a qualied land trust, thatlandowner is eligible to receive a tax credit of $250,000 (50% of $600,000 is $300,000, but the credit is limited to$250,000). If there are listed co-owners of the property (for example, a husband and wife, each of whose names mustbe on the deed), each would be entitled to earn the maximum $250,000 credit. In this example, the two co-ownerswould split the $300,000 credit, each receiving $150,000 for a total of $300,000.
ONCE EARNED, HOW DO I TRANSFER MY CREDIT?
Once you earn a tax credit, you may transfer it to a third party. Tis oers you immediate compensation, and oersthird parties the opportunity to reduce their tax liability. Youre free to attempt to locate your own third partypurchaser, but you may nd it benecial to use a credit facilitator instead. We can help you with this. Landowners
who transfer their credit should expect to receive approximately 80% of the value of their donation.
HOW CAN I LEARN MORE ABOUT PROTECTING MY LAND
WITH A CONSERVATION EASEMENT?
Te Santa Fe Conservation rust is a qualied New Mexico land trust. We work with you every step of the wayto ensure the easement donation process moves smoothly and your goals and needs are met. o learn more aboutdonating a conservation easement, please contact the rust at [email protected], or use the information at the bottom ofthis sheetand thank you for considering protecting your land.
Disclaimer: While SFC is pleased to provide landowners with this service, our sta are not attorneys, nancialplanners and geologists or appraisers. As such, the SFC sta is not qualied to dispense specic numbers andinformation regarding these elds of expertise. We urge you to hire experienced consultants to complete yourconservation team.